Her fear is echoed by a national think-tank that called Wednesday for reforms to the “outdated” rules for minimum withdrawals that it says could leave seniors like Logan at risk of outliving their savings.

Current rules require seniors to withdraw about seven per cent of their entire Registered Retirement Income Fund at age 71, with that figure slowly rising to about double that percentage over 20 years. After age 91, the required percentage rises sharply until it reaches 20 per cent for those 94 and older.

“Now you’ve got people working longer and retiring when they are 70 and all of a sudden at 71, you’ve got to put it in a RRIF and you must take money out,” Logan said, adding that many seniors took a hit with their personal investments in 2008 and have had to extend their work lives.

“If I live to my grandma’s age of 104, I’m going to be on welfare. I do think this needs another look.”

The C.D. Howe Institute report said the withdrawal rules were instituted in 1992 when the government was dealing with a debt crisis and looking for ways to keep tax revenues flowing into the treasury.

“In 1992 the federal government was deficit-ridden and hungry for cash,” according to the study. “Now it is close to surplus, and the timing of receipt of those taxes matters less to the government.”

The policy must be altered because longer lifespans and diminished rates of return on fixed-income investments have dramatically changed the landscape. For Canadians who have or are about to convert their Registered Retirement Savings Plan nest egg into a RRIF, the minimum withdrawal roles pose a threat, the authors argued.

“They oblige the holder to run tax-deferred assets down rapidly,” the report stated.

“RRIF holders now face serious erosion in the purchasing power of tax-deferred savings in their later years.”

Logan, the president of the Council of Senior Citizens Organizations of B.C., said she would prefer to wait until age 75 before withdrawing pension funds. “Once you take it out, it becomes cash flow,” she said. “I just think for me, it’s coming very, very quickly.”

Since 1992, the Income Tax Act requires RRSP holders to convert their savings into either an annuity, purchased through insurance companies, or a RRIF. Both result in regular payments expected to last until death.

Current RRIF rules require that the retiree withdraw 7.38 per cent of their entire RIF at age 71, with that figure slowly rising to about double that percentage over 20 years. After age 91 the required percentage rises sharply, from 14.73 per cent to 16.12 per cent, then 17.92 per cent, and finally 20 per cent for age 94 and above.

In 1992 (when the withdrawal had to begin at age 69) it was assumed that the average 71-year-old man would live to a little over 82, while a woman would live past age 85. But the current life expectancy has men living until past 85, and women 88.

Meanwhile, rates of return on Canadian bonds are significantly lower. So a $100,000 RRIF in 1992 would drop below $50,000 by the time the pensioner reached age 89, under $25,000 by age 95, and under $10,000 when they hit 101.

“Most retirees probably found these forced distributions no serious threat to sufficient tax-deferred funds in old age, which evidently made them acceptable at that time.”

But today, with lower returns on Canadian bonds, the savings would slide to below $50,000 by age 80 rather than 89, below $25,000 at age 87 rather than 95, and under $10,000 at age 94 versus 101.

That’s cutting it a bit close given that a man who reaches age 80 can expect to live to 89, while a woman who survives to age 80 can typically hang on until 91.

The report noted that male retirees who in 1992 faced “virtually no chance” of seeing their nest eggs’ value drop by 90 per cent in their lifetimes now face a one-in-seven chance this will happen, according to C.D. Howe. For a woman, it’s one-in-four.

The Harper government was non-committal on the think-tank’s call for a revamp.

“We are always considering different ways to keep Canada’s retirement system strong,” Kevin Sorenson, minister of state for finance, said in a prepared statement.

The statement noted that seniors have the option of putting their withdrawn money in Tax-Free Savings Accounts.

This would “achieve a similar result as if they were able to leave the equivalent pre-tax amount in a tax-deferred savings vehicle such as a RRIF.”

But that conclusion was challenged by veteran Vancouver financial planner John Clark, president of Pacific Spirit Investment Management Inc.

“The damage is done when the funds are withdrawn from the RRIF as the withdrawal is taken into taxable income and the retiree then only has the after-tax withdrawal left to invest,” Clark said.

He endorsed the C.D. Howe Institute’s call for more relaxed rules and said he’s now making financial plans based on the assumption clients will live until 95. That’s difficult given the government’s withdrawal requirement, he said.

“The biggest concern of our clients is outliving their money. They want to maintain their level of income on an inflation-adjusted basis going forward.

“The way the RRIF is structured makes that difficult.”

He noted that Canadians can’t ever avoid taxes on their RRIF wealth, since even at death the beneficiaries must pay taxes on what’s left.

“The government’s going to get their money one way or the other,” Clark said. “We would like the federal government to abolish the minimums and let each individual determine what they need to take out in order to sustain their lifestyle.”

He said such a change would also eliminate the “perverse” situation whereby low-income individuals forced to withdraw their RRIF savings can lose their Guaranteed Income Supplement payments.

The combination of income taxes and the GIS “clawback” would result in an effective tax of between 55 and 60 per cent, far higher than the maximum 45 per cent paid by B.C.’s top earners.

Gudrun Langolf, the vice-president of the Council of Senior Citizens Organizations of B.C., who has expertise in pension matters, said that “in terms of significance, what the C.D. Howe Institute is talking about is not really as large as you might think.”

“I am pushing my seventh decade and most people in that age bracket, in that tsunami, will not have RRIFs,” Langolf said. “Working women who brought up families on their own had very little opportunity to do the RRSPs.” The same goes for “an old person who did the things expected of you and stayed at home and minded the children.”

Langolf believes a better solution “for fending off penury for seniors in their later years has nothing to do with reforming RRIFs but everything with reforming the Canada Pension Plan and the Quebec PP.”

Introducing incremental changes to CPP and QPP contributions and maximums will result in more people benefiting and for longer, she said.

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